Exam 15: Working Capital and Current Assets Management

If the firm's credit period in decreased, the sales volume can be expected to increase, the investment in accounts receivable can be expected to increase, and the bad debt expenses can be expected to increase.

A negative cash conversion cycle

The ________ is an inventory management technique that compares production needs to available inventory balances and determines when orders should be placed for various material inputs.

The credit applicant's ________ is the financial strength of the applicant as reflected by its ownership position.

A risk of the ________ financing strategy is unpredictable interest expense.

The major external sources of credit information are all of the following EXCEPT

Table 15.1 Irish Air Services has determined several factors relative to its asset and financing mix. (a) The firm earns 10 percent annually on its current assets. (b) The firm earns 20 percent annually on its fixed assets. (c) The firm pays 13 percent annually on current liabilities. (d) The firm pays 17 percent annually on long-term funds. (e) The firm's monthly current, fixed and total asset requirements for the previous year are summarized in the table below: -The firm's annual financing costs of conservative financing strategy are ________. (See Table 15.1)

If the cash discount period is increased, the firm's investment in accounts receivable due to non-discount takers now paying earlier is expected to

A firm which uses the aggressive financing strategy plans to purchase raw materials in large quantities to take price discounts. The firm will finance the purchase with a loan. The most likely consequence of this action is

2/15 net 45 translates as 2 percent of the balance is due in 15 days; the remaining balance is due in 45 days.

Table 15.1 Irish Air Services has determined several factors relative to its asset and financing mix. (a) The firm earns 10 percent annually on its current assets. (b) The firm earns 20 percent annually on its fixed assets. (c) The firm pays 13 percent annually on current liabilities. (d) The firm pays 17 percent annually on long-term funds. (e) The firm's monthly current, fixed and total asset requirements for the previous year are summarized in the table below: -The firm's monthly average permanent funds requirement is ________. (See Table 15.1)

Table 15.4 Bowring Ball Bearings has 10 different items in its inventory. The average number of units held in inventory and the average unit cost are listed for each item. The firm uses an ABC system of inventory control -The Steel Works, Inc. is required to carry a minimum of 40 days' raw steel, which is 250 tons. It takes 15 days between order and delivery. At what level of steel would Steel Works reorder?

Assuming that the firm has done all it can to stimulate customers to pay promptly and to select vendors offering the most attractive and flexible credit terms, it can further speed collections and slow disbursements by taking advantage of the "float" existing in the collection and payment systems.

The economic order quantity (EOQ) is the order quantity which minimizes the carrying costs per unit per period.

Taizhou Products uses 800 units of a product per year on a continuous basis. The product has carrying costs of $50 per unit per year and order costs of $300 per order. It takes 30 days to receive a shipment after an order is placed and the firm requires a safety stock of 5 days usage in inventory. (a) Calculate the economic order quantity (EOQ). (b) Determine the reorder point.

Processing float is the delay between the receipt of a check by the payee and its deposit in the firm's account.

Working capital represents refers to a firm's long term capital.

An increase in the average payment period will result in ________ in the operating cycle and ________ in the cash conversion cycle.

The basic components of collection float include all of the following EXCEPT ________ float.

The ________ is a technique that divides inventory into three groups, according to dollar investment.